Washington (June 23, 2021) – The Association of Corporate Counsel (ACC) and Major, Lindsey & Africa (MLA) announced today the results of their annual legal benchmarking survey. The survey found that just 29 percent of companies that track internal diversity – and of those that do, 47 percent have a formal strategy to improve in this area. Additionally, despite the growing popularity of ALSPs, just 12% of companies increased their usage of these providers in 2020. The legal benchmarking survey was conducted between March and May of 2021 and had a total of 493 legal departments in 24 industries in 30 countries participate. The executive summary provides high-level survey results on legal department structure, work allocation, law firm usage, and staffing, spending, and diversity metrics.
“The ACC/MLA Law Department Management Benchmarking Report is a top-tier resource for the in-house counsel community to track and measure progress on numerous metrics,” said Veta T. Richardson, president & CEO of ACC. “The report gives law department leaders a wealth of data for peer comparisons and benchmarking across a variety of metrics in order to assess performance, results, and efficiency and take a data-driven approach to charting the legal operational and managerial goals to be achieved.”
“Since its inception in 2019, this report sets the industry standard for structuring and maintaining a high-performance legal department, said Greg Richter, VP, Retained Search and Advisory Services for MLA. For the first time this year we asked companies about their Diversity and Inclusion efforts, which is becoming an increasingly important metric within organizations.”
Tracking Diversity Remains a Challenge
Overall, 29 percent of survey participants reported tracking internal diversity metrics, though with considerable variation across company sizes. Among companies that track internal diversity, 47 percent have a formal strategy to improve in this area with actionable measures and tangible consequences.
With respect to the legal department’s outside counsel, 18 percent of participants reported tracking diversity metrics. The report also shows that that the vast majority (74%) specifically measure the diversity of the teams that handle their matters. Additionally, it breaks down the extent to which legal departments analyze diversity within the firms they engage (beyond their own matters), including by:
In contrast to the action-orientation of internal diversity tracking, among those that track outside counsel diversity only a quarter also reported having a formal strategy with tangible consequences to improve the diversity metrics of the law firms they engage (vs. nearly half of those that track internal diversity).
Cost Per Lawyer and Use of ALSPs Remain Relatively Consistent
Differences in spend are substantial across company sizes. Legal departments in small organizations record a median total legal spend of US $1.2 million, while those in mid-sized organizations report a value of US $8.4 million, and larger legal departments report a median of US $64 million in total legal spend.
One metric that is relatively consistent across company size is cost per lawyer hour. This cost was calculated by dividing total lawyer compensation spend by the number of lawyers in the legal department and further divided by the industry standard of 1,800 hours of work per year. The results across company sizes are similar, with the median values set at US $113, $131, and $123 for small, mid-size, and large companies, respectively.
Legal technology expense percentages were also found to be minimally affected by the size of the company. All companies regardless of size report the median value of two percent of total spend is allocated to technology solutions in the legal department. Departments are spending the most on contract management technology, with almost one-in-four legal departments reporting contract technology expenses, and 42 percent of those selected it among their top three areas in terms of technology-related spend.
Company revenue size shows large differences when reviewing the number of law firms and alternative legal service providers that participating organizations engage. On average, participants engaged 36 law firms and around 2 alternative legal service providers in 2020. Small companies relied on the services of 10 law firms and 0.5 ALSPs, medium companies engaged, respectively, 36 law firms and 2 ALSPs, and large organizations counted on 158 law firms and 5.4 ALSPs, on average. Despite the growing focus on ALSPs, only 12 percent reported engaging more ALSPs in 2020, compared to 29 percent reporting an increase in law firms used.
Legal Department Structure and Scope
Results show that in 80 percent of departments, the CLO reports directly to the organization’s chief executive officer. In 92 percent of companies with over $10 billion in revenue, CLOs reported directly to the CEO. CLOs in all participating pharmaceutical companies report directly to the CEO, followed by finance and banking (88.9 percent) and energy (86.7 percent).
Compliance tops the list of functions handled directly by legal at 77 percent of departments. An additional 7 percent reported that compliance is a separate division within the company, but reports to legal, which means that 84 percent of departments in total oversee the compliance function. Privacy (62 percent) and ethics (59 percent) are the other two functions that are part of the legal department in most participating organizations.
Staffing Metrics: Lawyer to Legal Operations Professional is 7 to 1
The report found departments tend to have at least one paralegal once there are three lawyers, an admin once there are five lawyers, and a legal-operations professional once there are seven lawyers. On average, two-thirds of legal department employees are lawyers, paralegals represent 12 percent, administrative and other staff account for eight percent each, and legal operations professionals represent six percent of total legal department employees.
Richardson continued, “With nearly 500 legal departments participating in the study, there is sufficient depth of data for law departments to engage in custom benchmarking against a defined peer group using their preferred combination of characteristics, including industry, revenue, and geographic footprint. We are grateful for MLA’s partnership to support the ACC research team to bring such a valuable report to today’s law department leaders.”
Full survey results, broken down further by company revenue, industry, legal department size, and company type, are available on ACC’s website.
About ACC Research: ACC Research provides data-driven insights through survey reports and white papers as well as benchmarking reports and advisory services to support informed decisions by in-house legal professionals.
About ACC: The Association of Corporate Counsel (ACC) is a global legal association that promotes the common professional and business interests of in-house counsel who work for corporations, associations and other organisations through information, education, networking, and advocacy. With more than 45,000 members in 85 countries employed by over 10,000 organisations, ACC connects its members to the people and resources necessary for both personal and professional growth. By in-house counsel, for in-house counsel.® For more information, visit www.acc.com and follow ACC on Twitter: @ACCinhouse.
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